Chad Cameroon Case

The Chad-Cameroon Petroleum Development and Pipeline Project

Professor Doug Cerf Donald Bren Graduate School of Environmental Science and Management Environmental Risk Management (ESM 286) Winter 2008

What has been accomplished by the Chad Cameroon Project?

•  Very interesting consortium of parties to accomplish

–  –  –  –  –  –  Economic development in a developing country Shared financial returns Sharing of risks Poverty alleviation Project development with concern for sustainable development Partnership of Governments, Private Corporations, Private Banks and The World Bank

•  How much risk is acceptable in economic development situations that have severe environmental and social issues?

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How did the financing differ?

•  Review Corporate Structure in Exhibit 3a •  Review Sources / Uses of Cash Exhibit 3b •  Field System

–  Oil wells and drilling equipment

•  Export System

–  Pipeline and off-shore loading system

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Corporate Finance for the Field System

•  No debt all equity •  3 sponsors (upstream consortium) •  Exxon/Mobil exposure 608m

–  40% of $1,521m –  Market value of equity $280b

•  High discretion over cash flows •  Monitoring is done internally

–  As opposed to the external monitoring similar to the equator principles

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Equator Principles

•  A new voluntary framework to guide project financing decisions •  Endorsed in 2003 by ten leading banks •  Non government organizations (NGO) wanted financers of large projects to take legal and moral responsibility for the social and environmental impact on local communities and host nations caused by the projects that they financed

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Project Finance

•  Project finance involves the use of limited or fully non-recourse debt by a...